Taxpayers on the hook for $540-million as Ottawa writes off another 44,000 unpaid student loans

Canada taxpayers on hook to write off $540-million in student loans

OTTAWA — The federal government is writing off another $231 million in unpaid student loans this year from more than 44,000 cases, meaning taxpayers are on the hook for more than half a billion in uncollected student debt over the past few years.

Supplementary spending estimates tabled Monday in the House of Commons by Treasury Board president Tony Clement call for an additional $231.2 million in the current 2012-13 fiscal year ending in March to write off 44,048 debts related to Canada Student Loans.

“Amounts being written off are debts for which all reasonable efforts to collect the amounts owed have been exhausted,” explains the 145-page supplementary spending estimates.

The new cash for 2012-13 is on top of nearly $312 million on the books from the 2011-12 fiscal year to cover unpaid Canada Student Loans from 98,448 debts dating back more than a decade.

Together, taxpayers are on the hook for more than $540 million over the past couple of years to cover uncollected student loan debt.

The mounting student loan write-offs come as the federal government is preparing to cut more than $5 billion in spending over the next few years as part of a sweeping expenditure review in last year’s budget.

However, the department has previously said that more than 98 per cent of the loans written off by the government are dropped because of the expiry of a six-year limitation period between when the borrower last acknowledged a loan and any legal activity by the Crown to recoup that debt.

Once this period has expired, the Crown no longer has the authority to collect the debt.

Approximately 87 per cent of all Canada Student Loans are repaid

In an attempt to collect the debts before the government is legally barred from doing so, the Canada Revenue Agency will send monthly statements and collection letters, recoup income tax refunds and refer accounts to the Attorney General of Canada, which could potentially garnish wages or seize assets.

Approximately 87 per cent of all Canada Student Loans are repaid, the department has said.

All told, the federal government is seeking $1.5 billion in additional spending through the latest round of supplementary estimates to help pay for federal programs and services in the current fiscal year.

Nearly $250 million in extra funding will go to HRSDC in 2012-13 to cover off additional expenses from an increase in the rates and the anticipated number of beneficiaries receiving Old Age Security pension and the Guaranteed Income Supplement for low-income seniors.